Prada SpA is falling out of fashion six months into its Hong
Prada SpA is falling out of fashion six months into its Hong Kong trading debut as investors brace for Chinese shoppers to curb spending.
Shares of the maker of $2,000 bags and Miu Miu shoes, which gets more than 42 percent of sales from Asia, have dropped 32 percent from their July peak.
“Chinese shoppers could cut back spending on luxury items in the near term, as the stock markets and the property markets have corrected steeply this year,” said Eddie Lau, head of regional consumer research at Citigroup. “The wealth effect is fading.”
Luxury goods sales in China will reach a record 88.8 billion yuan ($14 billion) in 2011, rising 12 percent this year and growing 82 percent since 2005, Euromonitor International estimates.
China will grow 8.5 percent next year, the lowest pace in 11 years, the Organization for Economic Cooperation and Development forecasts.
Asia is Prada’s biggest market, with more than 42 percent of its 2 billion euros revenue in the fiscal year ending January, compared with 29 percent two years earlier.
Prada’s stock has lost 32 percent from its July 27 record of HK$49.45, wiping more than $5 billion off its market value. The benchmark Hang Seng Index has lost 19 percent in the same period. The luxury goods maker, which raised $2.5 billion in June through Hong Kong’s biggest public offering this year, still trades at 20.52 times expected earnings, more than double that of the benchmark.